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We continue to remain ‘neutral’ with a selectively positive view on IT stocks.
We believe that an acceleration in earnings growth to mid teen territory over FY21-FY23, driven by organic U.S. dollar revenue growth of 10-12% for tier-I players is on the cards.
This is against an approximately 6.8% earnings growth during FY17-FY20, which was driven by 7.6% U.S. dollar revenue growth and Ebit margin drop of 100 basis points.
Much of the pick-up in growth is priced in and we are being selective in the choice of stocks.
We think that the question on investors’ mind currently is ‘how much stronger can this growth be in the near term and how long can this double digit growth last?’.
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